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What Is the Heikin-Ashi Technique?
The Heikin-Ashi technique averages price data to create a Japanese candlestick chart that filters out market noise.
Heikin-Ashi charts, developed by Munehisa Homma in the 1700s, share some characteristics with standard candlestick charts but differ based on the values used to create each candle. Instead of using the open, high, low, and close like standard candlestick charts, the Heikin-Ashi technique uses a modified formula based on two-period averages. This gives the chart a smoother appearance, making it easier to spot trends and reversals, but also obscures gaps and some price data.
- Heikin-Ashi is a candlestick pattern technique that aims to reduce some of the market noise, creating a chart that highlights trend direction better than typical candlestick charts.
- The downside to Heikin-Ashi is that some price data is lost with averaging, which could affect risk.
- Long down candles with little upper shadow represent strong selling pressure, while long up candles with small or no lower shadows signal strong buying pressure.
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